W W W . P A U L S O N W E A L T H . C O M
213 W WESLEY ST. SUITE 202 WHEATON, IL 60187 630.517.2950
2015 TAX PLANNING
It’s Year-End Tax Planning Time
As the end of the year approaches, we know you are busy with
holidays, family, and travel, but it is also a good time to do
some last minute tax planning. As a courtesy, we want to
provide you with a few eleventh-hour tax tips you may find
useful. Although tax planning is rarely fun, these strategies
could help you keep more of your hard earned money.
2015 Tax Planning
Page 1
Source: IRS.Gov
2015 Tax Planning I T ’ S Y E A R - E N D T A X P L A N N I N G T I M E
INTRODUCTION
Year-end tax planning is rarely fun, but we’re glad not to have a repeat of the Fiscal Cliff and government shutdown dramas that marred the end of the past few years. 2013 and 2014 ushered in major changes to the tax code in the form of the American Taxpayer Relief Act of 2012 (ATRA), which ended the Fiscal Cliff standoff, and the Affordable Care Act (ACA), which went into effect in 2014 for most taxpayers. While these two laws did not significantly affect most Americans, wealthy taxpayers saw an increase in their marginal income and capital gains taxes, as well as two new Medicare taxes.1
If you’re concerned about owing Uncle Sam this year, there may still be some last-minute moves that you can make to lower your tax burden. While our specialty lies in wealth management, we have worked with our CPA friends to compile these tips for you. Before acting on any of the advice in this communication, we suggest you consult with your personal tax professional. If you don’t have an accounting professional that you enjoy working with, please let us know and we will introduce you to one of our trusted associates.
The IRS recently announced its inflation adjustments for tax year 2015 and they are briefly summarized below:2
Federal Income Tax Brackets 2014-2015
2014 2015
25%
28%
33%
35%
39.6%
Single $36,900 - $89,350 $37,450 - $90,750
Joint $73,800 - $148,850 $74,900 - $151,200
Single $89,351 - $186,350 $90,750 - $189,300
Joint $148,851 - $226,850 $151,200 - $230,450
Single $186,351 - $405,100 $189,300 - $411,500
Joint $226,851 - $405,100 $230,450 - $411,500
Single $405,101 - $406,750 $411,500 - $413,200
Joint $405,101 - $457,600 $411,500 - $464,850
Single Over $406,750 Over $413,200
Joint Over $457,600 Over $464,850
2015 Tax Planning
Page 2
ACTIONS THAT COULD BE
TAKEN
Get Organized
Now is an excellent time of year to get your
financial house in order. Gather cash receipts to
help you calculate possible deductions and
miscellaneous payments. Do you have a hobby or
activity that generates income? If so, any losses
might also be eligible for deduction. Have you made
home improvements? Charitable contributions? Get
all of your documentation together early to make
your life a little easier in April and consult a tax
professional to discuss your personal situation.
Contribute the Maximum to Your Retirement
Plan
You have until April 15, 2015 to make IRA
contributions for 2014, but the sooner you get your
money into the account, the sooner it has the
potential to start growing tax-deferred. Making
deductible contributions also reduces your taxable
income for the year. In 2014 and 2015, you can
contribute a maximum of $5,500 to an IRA, plus an
extra $1,000 if you are 50 or older. This limit can be
split between a traditional IRA and a Roth IRA if you
desire, but the combined limit is still $5,500 or
$6,500, respectively.3
Check Your IRA Distributions
You are required to make minimum distributions
from your traditional IRA by April 1st following the
year in which you reach age 70 ½. So, if you turned
70 in August 2014, you’ll turn 70 ½ in March 2015,
and will need to start taking RMDs April 1, 2016.
Failing to take out enough triggers a 50% excise tax
on the amount you should have withdrawn based
on your age, life expectancy, and the amount in the
account at the beginning of the year.4
To avoid headaches and penalties,
mark your calendar with the
following key dates:
January 15, 2015
4th Quarter 2014 Estimated Tax
Payment Due
If you are self-employed or have
other fourth-quarter income that
requires you to pay quarterly
estimated taxes, get them
postmarked by January 15, 2015.
April 15, 2015
2014 Individual Tax Returns Due
Individual Tax Return Extension
Form Due
If you can’t file your taxes on time,
file your request for an extension by
April 15 to push your deadline back
to October 15, 2015.
1st Quarter 2015 Estimated Tax
Payment Due
Last Day to make a 2014 IRA
Contribution
If you haven't already contributed
fully to your retirement account for
2014, April 15 is your last chance to
fund a traditional IRA or a Roth IRA.
However, if you received a filing
extension, you have until October 15
to contribute to a Keogh or SEP plan.
June 15, 2015
2nd Quarter 2015 Estimated Tax
Payment Due
September 16, 2015
3rd Quarter 2015 Estimated Tax
2015 Tax Planning
Page 3
Fatten Your Employer-Sponsored
Retirement Plan
Tax-deferred investing is a smart choice
because it allows your money to grow tax-
free until you withdraw it. Maximize your
401(k), 403(b), 457, and TSP contributions,
which are $17,500 or $23,000 if you will be
age 50 or older in 2014, and will increase to
$18,000 and $24,000, respectively, in
2015.5,6
Weigh the Benefits of Loss-Harvesting
In order to avoid paying capital gains taxes,
many investors sell off investments such as
stocks that have experienced losses in
order to help offset any taxable gains
realized during the year. If you think that
you may have a heavy capital gains burden
this year, talk to your tax professional and
financial representative about whether loss
harvesting may be a good strategy for you.7
Pay Attention to Your FSA
Remember that tax-free withdrawals can be
taken from FSAs for qualified medical,
dental, and child-care costs in 2015.
Depending on your employer’s policies, you
may lose any balance left in these accounts
at the end of the year, so take advantage
now by filling prescriptions early, making
medical or dental appointments, or
scheduling elective surgeries.
This is also the time of year when you may
need to specify how much salary you’ll
contribute to your flexible spending account.
In 2015, the annual limit for employee
contributions to sponsored health FSAs
increases to $2,550 from $2,500 in 2014.
The IRS also made an important change to
FSA rules, and will allow employees with
“Section 125 Cafeteria Plan” FSAs to either
carry over up to $500 of their account
balance or have a two and a half month
Important Tax Issues & Updates for
2015
Healthcare Reform in 2014 and
Beyond
2014 saw major changes to healthcare
in the U.S. Beginning in 2014, all
Americans will be required to maintain
health insurance and the IRS is
responsible for monitoring
compliance.
Starting in 2014, your W2 will report
the value of your health plan to the
IRS. This key figure will determine
whether you are eligible for tax credits
or penalties. You will not need to
report this number as income on your
tax return.
Taxpayers without health insurance
(or coverage under someone else’s
policy) will be assessed a penalty
starting at $95 or 1% of income
(whichever is greater) in 2014. This
penalty will rise each year until it
reaches 2.5% of income or $695 per
person in 2016.
Medical Expense Deductions
The ACA increased the threshold for
deducting medical expenses from
7.5% to 10% of your AGI in 2014. Now,
someone earning $100,000 can only
deduct medical expenses above
$10,000 instead of $7,500.
However, the 10% rule is exempted for
taxpayers (or their spouses) who are
2015 Tax Planning
Page 4
grace period. The grace period would allow employees to use money from the previous tax
year to cover qualified medical expenses until mid-March of the next year. Employers can
allow employees to have either the carry-over provision or the grace period, but not both.
Check with your employer to see whether they will allow the new rules to apply in the 2015
tax year.8
Consider Accelerating Your Mortgage Payments
Unlike rent, which is paid in advance, mortgage payments represent money owed for the
previous occupancy period. This means that your January 2015 mortgage statement is a
bill for December’s payment and represents interest accrued in 2014, making it eligible for
a tax break this year. By mailing that mortgage check in advance, you qualify for an
additional deduction in 2014. It may be wise to pay it early in December so that your lender
officially notes the payment to the IRS in 2014. Unfortunately, you can’t accelerate your
mortgage payments for any other upcoming month because the IRS generally prohibits
write-offs for prepaid interest. Keep in mind that everyone’s tax situation is different and
accelerating your mortgage payments may not pay off if you expect to be subject to the
Alternative Minimum Tax (AMT). If you are unsure, discuss the matter with your tax
professional.9
Go Green
Buyers of plug-in hybrids and electric cars benefit from a tax credit of $2,500 to $7,500,
depending on the size of the battery in the car. The credits apply to plug-in hybrids
purchased after December 31, 2009, though certain models may have been phased out
based on sales quotas.10 In addition, some alternative energy improvements to your home
may qualify for tax credits in 2014 and 2015.11 Check with a tax professional to find out
which credits apply to your circumstances.
Be Charitable
A gift to a qualified charitable organization may entitle you to a charitable contribution
deduction against your income tax if you itemize deductions. If the gifts are deductible, your
tax savings reduces the actual cost of the donation. For example, if you are in the 33% tax
bracket, the effective cost of a $100 donation is only $67. As your income tax bracket
increases, the real cost of your charitable gift decreases, making contributions more
attractive for those in higher brackets. For a person in the highest tax bracket, 39.6%, the
actual cost is only about $60. Not only can the wealthy afford to give more, but they also
receive a larger reward for giving. Typically, charitable donations are capped at 50% of your
AGI, though limits of 20% or 30% may apply in some cases.12
Give a Gift
This time of year, many people choose to donate items to charity instead of making a
monetary contribution. Not only can donations save you money and prevent perfectly good
items from getting wasted, but they can be deducted from your taxes as long as you get
written documentation of the donation.
2015 Tax Planning
Page 5
You can also pass money to loved ones tax-free each year. You can give up to the annual
exclusion amount ($14,000 in 2014 and 2015) to any number of people every year, without
facing any gift taxes. Recipients never owe income tax on the gifts.13 In addition to the
annual gift amount, the IRS allows you to give up to $5.34 million to each heir (as of 2014)
during your lifetime or as part of your estate without paying taxes. In 2015, the estate and
gift tax exemption will rise to $5.43 million.14 This limit is indexed to inflation and will
continue to rise each year, increasing the amount that you can gift without owing taxes on
it.
Fund an Education
The IRS offers taxpayers several credits and deductions to help offset the cost of
education. The American Opportunity tax credit was extended through 2017 and allows you
to claim qualified expenses up to $2,500 for 2015.15 Because a tax credit reduces your tax
bill dollar-for-dollar, this basically means the government will give you up to $2,500 per year
for each qualifying college student in your family. The Hope Scholarship Credit will allow
you to claim qualified expenses up to a maximum of $2,500. You can deduct interest
payments on student loans in 2015, also up to a maximum of $2,500. Keep in mind that
income restrictions kick in for these credits, so check with your tax professional to see if
you qualify.16
Don’t Forget the New Medicare Taxes
Beginning in 2014, two new Medicare taxes went into effect. The first was a new 3.8%
Medicare tax imposed on profits from the sale of investment property. This includes capital
gains, dividends, interest payments and net rental income, though distributions from
qualified retirement plans are exempt. The tax applies to wealthy individuals earning a
gross income of $200,000 or more and joint filers with a combined gross income of
$250,000. The second tax was a 0.9% tax applied to wages and compensation in excess of
$200,000 for single taxpayers, and $250,000 for joint filers. These brackets are not indexed
for inflation, so they will affect more taxpayers each year. If you’re in the affected income
brackets, speak with your investment representative and accounting professional to discuss
how the new taxes will affect your tax burden this year.17
CONCLUSION AND STEPS TO TAKE We hope you have found this report to be informative and that you will find some of these
strategies useful as you go through your tax planning process this year. One of the ways we
help our clients is by working hard to provide tax-smart investment strategies to minimize the
impact Uncle Sam can have on your bottom line. In addition, we consider it our responsibility to
educate you about things that could affect your financial future. If you have any questions
about your taxes or how tax-efficient planning can help reduce your tax burden, please give us
call. We also recommend that you speak with a qualified tax professional who can advise you
on the specifics of your personal tax situation.
2015 Tax Planning
Page 6
Sincerely,
Nathan Paulson
Nathan Paulson CFP® Managing Director
Would someone you know benefit from receiving this communication? If so, call our office at 630.517.2950 to provide us with their contact information and we will be happy
to send them a copy.
Footnotes, disclosures and sources:
Investment Advisory services offered through Paulson Wealth Management LLC, a registered investment advisory firm. Securities offered through Comprehensive Asset Management and Servicing, Inc. Member, FINRA/SIPC/MSRB
Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment
and are subject to change without notice.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods
of declining values.
Past performance does not guarantee future results.
Consult your financial professional before making any investment decision.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please
consult your financial advisor for further information.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or
Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or
Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to
its completeness or accuracy. Please consult your financial advisor for further information.
By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information
available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the
selected site.
1 “TAX PROVISIONS IN THE AMERICAN TAXPAYER RELIEF ACT OF 2012 (ATRA).” Urban-Brookings Tax Policy Center.
http://www.urban.org/UploadedPDF/412730-Tax-Provisions-in-ATRA.pdf [Accessed 30-October-2014]
2 “In 2014, Various Tax Benefits Increase Due to Inflation Adjustments.” IRS. http://www.irs.gov/uac/Newsroom/In-2014,-Various-Tax-Benefits-
Increase-Due-to-Inflation-Adjustments [Accessed 30-October-2014] 3 “IRA Contribution Limits.” IRS. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits
[Accessed 30-October-2014]
4 “Required Minimum Distributions.” IRS. http://www.irs.gov/retirement/article/0,,id=96989,00.html [Accessed 30-October-2014]
2015 Tax Planning
Page 7
5 “IRS Announces 2014 Pension Plan Limitations.” IRS. http://www.irs.gov/uac/IRS-Announces-2014-Pension-Plan-Limitations;-Taxpayers-
May-Contribute-up-to-$17,500-to-their-401(k)-plans-in-2014 [Accessed 30-October-2014]
6 “IRS Announces 2015 Pension Plan Limitations.” http://www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-
Taxpayers-May-Contribute-up-to-$18,000-to-their-401(k)-plans-in-2015 [Accessed 30-October-2014]
7 “Tax-Loss Harvesting: A Tactical Strategy to Add Incremental Value.” MorningStar.
http://news.morningstar.com/articlenet/article.aspx?id=439379 [Accessed 30-October-2014]
8 “Modification of “Use-or-Lose” Rule For Health Flexible Spending Arrangements (FSAs).” IRS. http://www.irs.gov/pub/irs-drop/n-13-71.pdf
[Accessed 30-October-2014]
9 “Early year-end mortgage payment could cut taxes.” Bankrate.com. http://www.bankrate.com/finance/taxes/cut-taxes-with-early-mortgage-
payment-1.aspx [Accessed 30-October-2014]
10 “Plug-In Electric Drive Vehicle Credit (IRC 30D.” IRS. http://www.irs.gov/Businesses/Plug-In-Electric-Vehicle-Credit-(IRC-30-and-IRC-30D)
11 “Energy-Efficient Home Improvements Can Lower Your Taxes” IRS. http://www.irs.gov/uac/Newsroom/Energy-Efficient-Home-
Improvements-Can-Lower-Your-Taxes [Accessed 30-October-2014]
12
“Charitable Contribution Deductions.” IRS. http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Charitable-Contribution-
Deductions [Accessed 30-October-2014]
13 “In 2014, Various Tax Benefits Increase Due to Inflation Adjustments.” IRS. http://www.irs.gov/uac/Newsroom/In-2014,-Various-Tax-
Benefits-Increase-Due-to-Inflation-Adjustments [Accessed 30-October-2014]
14 “In 2015, Various Tax Benefits Increase Due to Inflation Adjustments.” IRS. http://www.irs.gov/uac/Newsroom/In-2015,-Various-Tax-
Benefits-Increase-Due-to-Inflation-Adjustments [Accessed 30-October-2014] 15
“American Opportunity Tax Credit.” IRS. http://www.irs.gov/uac/American-Opportunity-Tax-Credit [Accessed 30-October-2014] 16
“IRS Announces 2015 Tax Brackets, Standard Deduction Amounts And More.” Forbes.
http://www.forbes.com/sites/kellyphillipserb/2014/10/30/irs-announces-2015-tax-brackets-standard-deduction-amounts-and-more/ [Accessed 30-October-2014] 17
“Questions and Answers on the Net Investment Income Tax.” IRS. http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
[Accessed 30-October-2014]